Don't Make These 5 Small Business HR Mistakes in 2025
As HR consultants working with many small businesses, we're seeing several recurring mistakes that could cause significant problems in 2025. Here's your guide to avoiding these pitfalls and protecting your business.
As we move into 2025, the workplace landscape continues to evolve rapidly. From changing regulations to shifting employee expectations, small business owners face unique challenges in managing human resources. Avoiding common HR mistakes is essential for staying compliant, maintaining a motivated workforce, and protecting your business. Here are some common pitfalls to watch out for and how to steer clear of them in the new year.
1.Ignoring AI-Driven Hiring Compliance
HR technology can be a game-changer for small businesses helping to streamline processes like hiring. Avoiding HR technology tools can even put your business at a disadvantage. But more states are implementing Artificial Intelligence (AI) transparency laws for hiring processes. As of this writing, five states and one municipality have implemented mandatory AI bias audits.
New York City passed the nation’s first-ever law requiring employers to conduct bias audits of automated employment decision-making tools, information about the bias audit is publicly available, and certain notices have been provided to job candidates.
Months later, the U.S. Equal Employment Opportunity Commission issued guidance for employers about how to audit AI for employment discrimination. The Consumer Financial Protection Bureau, the White House, U.S. Department of Justice and Federal Trade Commission have all also released commitments to cracking down on discrimination in tech.
We're seeing businesses unknowingly violate these regulations by:
* Using AI-powered applicant tracking systems without proper disclosures.
* Failing to provide job candidates with information about AI evaluation tools.
* Not maintaining human oversight of AI-driven decisions.
* Failing to develop and provide data privacy policies to employees about how their data is being used.
Solutions:
When considering AI technology for hiring, scrutinize the vendor to assess their level of compliance with AI regulations.
Develop and disseminate clear disclosure AI policies and maintain human review processes for all AI-assisted decisions.
Continue to stay apprised of new AI regulations as they are published.
Develop a data privacy protection policy explaining how employee data is used.
2. Refusing to Offer Remote Work (when possible)
Remote work in some capacity is here to stay for some positions. Twenty-nine percent of small businesses offer remote work options to their employees as a benefit and over 95% of workers want some form of working from home. Failure to offer remote work can lead to disengagement, reduced employee well-being, and low morale.
We're seeing remote work causes small business the following challenges:
* Incorrectly classifying remote employees as contractors.
* Treating out-of-state remote workers under home-state laws.
* Missing performance issues and maintaining poor documentation due to irregular in-person contact.
* Inconsistent tracking of flexible work arrangements.
Solutions:
Familiarize yourself with the guidelines and state laws regarding employee classification.
Develop and implement a remote work policy that accounts for multi-state compliance and conduct regular classification audits.
Train managers on remote management and documentation best practices.
Schedule regular check-ins with employees to discuss performance, goals, and challenges.
Regularly provide employees constructive feedback and actionable suggestions for improvement.
Regularly recognize achievements to boost motivation and morale.
3. Pay Transparency Violations
There’s a growing number of new laws requiring greater pay transparency to help address pay inequity. Pay transparency also helps 70% of organizations in recruiting that list pay ranges on job postings leading to more people applying to their postings. The pace of pay transparency has grown fastest in high-wage jobs like software development, mathematics, and banking and finance and is slowest in the U.S. Southern states.
Pay transparency laws range in compliance but can require employers to provide pay ranges for jobs upon applicant request or not or include pay information in all job postings. As of this writing, nine states and six municipalities require some sort of pay transparency.
To also help address pay inequities, there’s a growing number of salary history bans. These laws make it illegal to ask job candidates to provide salary history as part of the recruiting and hiring process. This practice has been shown to perpetuate pay inequities. As of this writing, there are 22 statewide bans and 23 municipal bans.
We're seeing pay transparency laws causing small business the following challenges:
* Missing salary ranges in job postings.
* Lacking documentation regarding employee pay decisions preserving pay inconsistencies.
* Lacking a compensation policy or poor communication of the policy.
* Adhering to pay transparency rules under home-state laws for job postings posted seeking talent nationwide.
Solutions:
Develop clear compensation guidelines.
Provide pay ranges on job postings, even if not leagally required.
Ensure compliance with state-specific transparency laws for job postings where you are seeking candidates.
Carefully read and adhere to the specifics regarding the pay transparency regulations as they can range substantially in requirements.
Document reasons for employee pay changes and place in employee’s personnel file.
4. Failing to Address Harassment or Discrimination
A reactive or dismissive approach to a harassment or discrimination claim can steer your business toward a costly legal landmine and damage your business’s reputation. The EEOC saw a 30% increase in discrimination claims and recovering a record $665 million for workers in 2022. It’s now more crucial than ever to create a respectful and inclusive work environment for all employees.
We're seeing small business businesses inadvertently doing the following:
* Not following up or immediately investigating claims of possible discrimination, harassment, or bullying (regardless of your opinion on truthfulness of the claim).
* Refusing to take a discrimination, harassment, or bullying claim seriously.
* Lacking an anti-harassment or anti-discrimination policy.
* Failing to enlist qualified third-party help such as CPR as soon as possible.
Solutions:
Implement clear anti-harassment and anti-discrimination policies.
Train employees and managers on recognizing and preventing inappropriate behavior.
Take complaints seriously and investigate promptly and thoroughly.
Enlist the help of a qualified third-party HR Consultant such as CPR as soon as possible after a complaint.
5. Refusing to Hire an HR Consultant
HR regulations are constantly changing, especially with the start of a new Presidential administration in 2025. A new political administration historically causes regulatory shifts and leadership sweeps across regulatory agencies. President Trump is predicted to have a business-centric approach to regulation, and he is positioned to follow through with this approach with a unified government (branches of government all Republican-aligned).
There is only speculation regarding HR changes coming, but CPR predicts changes to family paid leave requirements, more updates to state wage laws, expansion to data privacy protection, and reduced regulation when employing gig workers. Failing to stay updated can lead to costly penalties and legal disputes.
Solutions:
Hire CPR to help maintain compliance with the latest HR regulations.
Subscribe to CPR’s newsletters to stay up to date.
Promptly update your employee handbook regularly to reflect changes in laws and company policies.
Conclusion
Avoiding these common HR mistakes in 2025 will help you set a foundation for a compliant workplace. CPR understands the unique challenges small business owners face. The HR landscape will continue to evolve in 2025. Regular audits and updates of your HR practices aren't just good business but essential for compliance and risk management.
Need help implementing these changes? Contact us today for a comprehensive audit of your HR practices as we head into 2025!
Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
